Filing taxes is no simple task, especially for
self-employed workers. In fact, according to a recent study by QuickBooks
Self-Employed, it’s one of their top five struggles!
When asked to name the toughest part about
taxes, 30 percent cited “filing the forms correctly,” 30 percent listed
“filling out the paperwork,” 32 percent said “estimating how much tax to pay,”
and 20 percent said “saving enough money for taxes.” The final 17 percent reported
it was difficult to find deductions they could take.
As for how
they file their taxes, interestingly enough, the results are basically split
three ways: A third use tax filing software, a third go through an accountant,
and a third still file using paper.
The most common reason for self-employed
workers to use an accountant is they’ve never done their taxes before and they
don’t want to start. Around 1 in 5 say they use an accountant because filing
themselves takes too much time, while 17 percent say they’ve attempted to do
their own taxes in the past but failed, so they prefer to use an accountant.
Hiring an accountant to ensure taxes are done
correctly is smart, especially when 36 percent of self-employed workers report
having been audited by the IRS. That’s extraordinarily high compared to the .7
percent of total taxpayers audited in 2016 (according to CNBC). Even individuals who make
over $1 million a year are less likely to have their returns audited — sitting
at just over 5.8 percent.
Young taxpayers are among those most likely to
be audited. According to the survey, 11 percent of people aged 54 and up have
been audited, compared to 46 percent of those aged 18-24.
Another reason is it’s incredibly easy for a
self-employed worker to get behind on their taxes. Forty-two percent
underestimate how much they’re supposed to pay, while 30 percent aren’t able to
afford their taxes. Interestingly, 32 percent were either unaware they needed
to pay taxes or forgot to pay them, while 10 percent said they didn’t know how.
In the end, 36 percent of self-employed
workers say they don’t pay any taxes — 17 percent said it was because they
don’t make enough money, 10 percent said it was because their losses exceed
their profits, and 9 percent gave no reason.
Around 30 percent of self-employed workers say
they don’t report all their income — including 6 percent who say they don’t
report any. Part-time self-employed workers are actually twice as likely to
underreport their income.
One sign that many folks find taxes confusing
is 1 in 10 self-employed workers surveyed didn’t know about the country’s most
recent tax reform. Of those who were aware of it, a third said they expect to pay more in 2018,
while half that said they expect to pay less. Regardless, when asked what area
of taxes they want to learn more about, the No. 1 response for self-employed
workers was anything and everything tax-related.
What do you think?
*Danielle Higley is a copywriter for TSheets by QuickBooks, a time tracking and
scheduling solution. She has a BA in English literature and has spent her
career writing and editing marketing materials for small businesses. Last year,
she started an editorial consulting company.
5 comments:
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It's a hassle for self-employed to pay taxes
Small Business Tax
Nice to see a few areas with low tax rates. People get excited about no state income tax in Texas but then they see the property taxes. I see clients move to the Midwest or Northeast and they get sticker shock.
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